It is Dawlish, Devon in the UK.
You can easliy find the row of guesthouses on Google Earth. Just follow Marine Parade adjacent to the railway. It all looks a lot brighter and spruce now.
The scenes by the seaside were indeed filmed in Dawlish. In fact that piece of railway was infamously washed away in the winter storms a few years ago!
Looking at other locations used, does anyone know where the scenes set in Czechoslovaia were filmed? I realise it looks very "eastern European" but I doubt the Czech authorities would have allowed filming! The cars used in those scenes (a coule of early Skoda Octavias, a Trabant and a Tatra) are all brilliant! As to locations, the usual sources don't have much information, hence the inquiry.